A coordinated agreement to implement 'tailored' policies to slash budget deficits without derailing growth at the G20 summit on Sunday helped enliven the FTSE this morning.
'Our challenges are as diverse as our nations,' US President Barack Obama said. 'But together we represent some 85% of the global economy, and we have forged a coordinated response to the worst global economic crisis of our time.'
A common goal to lower national budget deficits by 50% by 2013 without stunting growth emerged at the G20 summit over the weekend. At the same time, however, the leaders at the G20 acknowledge that each country is different and that a one size fits all policy won't accomplish anything at this juncture. This means that each country will have to produce a tailored policy to accomplish the common objective. Leaders attending the G20 summit also agreed to be more flexible with banks since it is crucial that they continue to lend. As a result the deadline for stripping debt has been pushed back by 12 months, giving banks more time to adopt tougher rules.
The lenient stance provided banks with a breather, helping Barclays, Lloyds Banking Group and HSBC rebound between 0.2% and 1% higher earlier this morning. An update note from Nomura also helped the sector. According to the broker UK banks are benefiting from declining impairments, rising profit margins and stronger capital bases. Nomura also said that domestic banks are trading on valuations at or below book value and raised their rating on Lloyds to 'buy' with a price target of 80p, adding that Lloyds Banking Group is now its preferred UK banking name.
Meanwhile, Asia-focused bank Standard Chartered fell 1.3% to 1719.5p, after saying income for the first six months of this year is likely to be flat compared with the same period in 2009. Standard Chartered said it had a strong start to the year, however, and that it has continued to increase in market share.
By 11.30am the FTSE 100 Index was trading at 5063.67, representing a 17.2-point (+0.34%) gain over Friday's close. In addition, the broader FTSE 250 was 42.06 points (+0.44%) higher at 9648.11.
Resource shares also contributed to the FTSE's ascent today, with BP rebounding 3.1% to 314p this morning on reports that its relief well drilling was making progress and that it could even be completed within a two to three week period. BP's shares tumbled on Friday on fears that the rising costs associated with the Gulf of Mexico oil spill may bankrupt the company. Predictions of a storm in the Gulf of Mexico also exerted pressure on BP's share price.
Shares of recently floated Essar Energy gained 1.9% to 459.4p following upbeat comments from JP Morgan Cazenove, which said the company stands to benefit from deregulation in India.
In contrast, solar shares were all in the red today after Goldman Sachs said they 'expect further declines in solar-cell prices in the coming years to lead to more losses in the cell manufacturing business.' Shares of Renesola retreated 2.8% to 188p while PV Crystalox Solar fell 1.35% to 54.75p.
Looking ahead, investors should keep an eye out for the US personal income and spending data, scheduled for release at 1.30pm (London time) .
